Car finance affordability concerns raised by consumers
【Summary】Half of UK consumers who have financed a vehicle purchase in the past year are concerned about the affordability of their monthly payments. Younger car buyers are more worried than older ones. Many respondents said that dealers did not consider future economic circumstances when discussing affordability. Consumers expect dealers to explain repayment obligations, terms and conditions, and salesperson qualifications. Rising living costs and inflation are impacting car buyers' affordability.
According to a recent nationwide survey commissioned by ALPHERA Financial Services, half of UK consumers who have financed a vehicle purchase in the past year are now concerned about the affordability of their monthly payments. When asked about their level of concern, 10% said they were 'very concerned' and 40% said they were 'somewhat concerned'.
The survey also revealed that younger car buyers are more likely to be worried about affordability, with 55% of them saying they were 'somewhat concerned', compared to only 16% of those aged 65 and over.
Interestingly, 43% of respondents stated that the dealer did not encourage them to consider potential future economic challenges when assessing affordability before taking out the finance agreement.
Consumers have different expectations of dealers when it comes to discussing finance agreements. 66% believe that dealers have a responsibility to discuss repayment obligations, 58% expect them to explain terms and conditions and any additional charges, and 31% think that dealers should disclose whether the salesperson is qualified or accredited to sell car finance packages.
Kirk Franks, head of national sales at ALPHERA Financial Services, commented on the survey findings, stating that they indicate the ongoing impact of the cost-of-living crisis on car buyers. Factors such as inflation, rising interest rates, and higher fuel costs are affecting affordability. Franks also emphasized the importance of dealers ensuring fair value and transparency, in line with the new Consumer Duty.
When determining the affordability of a new vehicle finance agreement, consumers consider the cost of monthly payments as the most important factor (86%), followed by the size of the deposit (63%), and any potential additional finance charges like excess mileage or vehicle damage (42%).
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